China's wind power conundrum
As a clean, relatively cheap and reliable alternative to burning fossil fuels, wind power plays an important role in China’s energy mix. Given concerns about the country’s dependence on imported petroleum and about the serious air pollution caused by burning coal, the mandate to shift from fossil fuels never has been stronger.
The urgency is reflected in China’s ambitious target under its Intended Nationally Determined Contribution to supply 20 percent of electricity from renewable energy resources by 2030.
China’s track record on renewables already is impressive. The country installed nearly half of all new global wind capacity in 2015, adding 30.8 gigawatts (GW) (PDF) (other sources show 30.5 GW) for a total capacity exceeding 145 GW . (See Figure 1.)
China also is the largest investor (PDF) in renewable energy, spending $102.9 billion in 2015 alone. Forty-three percent of these investments specifically have targeted wind power.
Figure 1. Wind Power Cumulative Capacity and Annual Additions, by Country, 2015. Source: REN21, Renewables 2016 Global Status Report.
Yet China fails to take full advantage of its extensive wind power resources. According to the central government, 33.9 GW of wind-generated electricity went unused in 2015 alone — representing nearly 15 percent of total wind energy generated, valued at $2.77 billion.
The scale of this waste is enormous, equivalent to the annual electricity consumption of 3 million American households and greater than the United Kingdom’s total wind power generation in 2015. Perhaps most striking, although China nearly has doubled the installed wind generation capacity of the United States (145.1 GW versus 75.0 GW), actual Chinese generation is less than U.S. generation (186.3 terawatt-hours [TWh] versus 190.9 TWh).
This wasted energy reflects not only sunk investment and foregone economic benefit, but also a missed opportunity to fight climate change. Wind power in China has the potential to offset billions of kilowatt-hours of electricity generated by fossil fuels, such as coal, that produce substantial greenhouse gas emissions.
With these obvious benefits in mind, what headwinds is China facing?
Slowing economic growth
In 2015, China’s gross domestic product (GDP) grew at the slowest rate in 25 years, a trend reflected in the country’s flatlining power demand. According to the National Energy Administration, total electricity consumption in 2015 was 55,500 TWh, an increase of only 0.5 percent from the previous year. This increase is 3.3 percentage points below the 2014 level and reflects the lowest growth since 1974. Meanwhile, siginficant new wind power capacity was added in 2015 under the expectation of continued strong economic growth and power demand — resulting in an oversupply.
A growing energy infrastructure gap
Inconsistencies between national and provincial governance of the energy sector is sapping China’s electricity infrastructure.
Prior to 2011, provincial governments were permitted to approve all wind power projects smaller than 50 megawatts. Embracing newly affordable wind technologies, local power producers applied rapidly for generation permits, most of which were below this cap. Provincial governments were happy to approve these 49.5 MW power projects to attract investment and improve provincial GDP performance. Taken together, however, these small-scale plants rapidly have overwhelmed China’s electrical grid infrastructure.
Responding to this challenge, the central government (Chinese) changed permitting regulations in 2016, expanding national regulatory oversight to all new provincial wind power additions.
Xie Guohui, an analyst at the State Grid Energy Research Institute, said, "Even though China will not approve new projects, the scale of existing wind power installations is huge, leaving the grid struggling to cope with it." And a professor from Xiamen University noted, "The main cause of idling turbines is an overcapacity in China’s power generation. China’s power supply currently surpasses its demand by 20 to 25 percent." (See Figure 2.)
Figure 2. China Wind Power Installed Capacity versus Grid-Connected Capacity, 2006–14. Source: Xi Lu et al., Challenges faced by China compared with the U.S. in developing wind power.
Infrastructure considerations also are important because of the disparities between where Chinese wind energy is generated and where it is needed. Northern China provides nearly 80 percent of the total wind generation. (See Figure 3.)
However, consumption of electricity is heavily concentrated along the coast and in the South. In 2014, an estimated 47 percent of wind power curtailment (Chinese) was caused by limited ability to consume it in Gansu province. Simply put, most Chinese wind energy has to travel a long way to reach a sufficiently large market for electricity. Although some transmission lines exist, new wind installations quickly have outpaced infrastructure additions.
Figure 3. Wind Power Installed Capacity by Province, 2014
Disconnect between provincial and national governance in China
In China, coal plants are still the main source of electricity (see Figure 4), and the central government still maintains guaranteed quotas for coal-fired electricity generation. Meanwhile, there are no mandatory quota regulations on regional grids to integrate wind-powered electricity, leaving renewable energy struggling to compete. That said, the Renewable Energy Law, issued in 2005, "requires local governments and state-run power grid operators to buy all electricity produced by a firm using renewable sources that fall within the government quota," said Yang Fuqiang.
Figure 4. Electric Generating Capacity by Fuel Type, 2000–13. Source: The Energy Collective, China’s Electrcity Sector at a Glance: 2013
For local governments, coal-fired plants are still more important than wind power because they are the primary source of tax revenue and employment. As a result, national laws and regulations often are unpredictable and are poorly communicated by provincial authorities.
On March 31, the Chinese Wind Energy Association accused three provincial governments of adopting policies that violated the Renewable Energy Law:
- Authorities in Yunnan province issued a policy in November that slapped an extra surcharge on wind and hydropower producers and used the revenue to subsidize coal-fired plants.
- The Xinjiang Provincial Government not only squeezed the production quotas of wind, solar and hydropower producers, but also levied an extra fee on them and used this revenue to subsidize coal-fired power plants in December.
- The Gansu Provincial government cut the price paid to wind power producers per watt by 40 to 75 percent from the state-run operator of the local grid.
China’s wind policy forecast
According to Haibing Ma, China Program Manager at the Worldwatch Institute, "Current policies can only solve the curtailment problem to a limited extent. The more important thing is electricity market reform."
Wind power development is not simply a question of capacity building, but also reflects the need for a comprehensive plan and policy implementation. Although China’s ambitions to develop renewable energy are admirable, it also is important to identify the problems and challenges associated with this transition and to apply the lessons learned in the next stage of development.
Curtailment likely will be a short-term problem, as wind power is essential for China to achieve its INDC target under the 2015 Paris Agreement on climate change. And electricity reform is being hotly debated in the country. Therefore, the Chinese government needs to move fast, both centrally and locally, and private sectors need to adjust to a new relationship between energy supply and consumption.